Executive Conversations is a HousingWire web series that profiles powerful people in the financial industry, highlighting the operations and the people that make this sector tick. In the latest installment, we sit down with Patrick Nackley, director of marketing and business development at Superior Home Services Inc., to talk about the growing demand for FHA loans, and what options mortgage servicers have to rehabilitate distressed or foreclosed FHA properties that are in disrepair.
Q. In light of the FHA premium cut, FHA loans are more popular these days, a trend that is expected to continue. More FHA loans traditionally translate to a certain percentage of those properties entering default. What challenges are there with servicing FHA loans in default, and in particular, meeting FHA conveyance requirements where borrower redemption efforts are unsuccessful?
A. A recent industry survey indicated that the biggest challenge associated with the servicing of FHA mortgage loans in default is fulfillment of FHA property preservation and conveyance requirements.
FHA properties in default must comply with strict standards concerning property condition during mortgagee possession, and unlike most loan types, there is a repair expectation for a number of property hazards, including many insurable perils, prior to conveyance to HUD. A servicer is expected to proceed with conveyance only where the property meets a condition consistent with HUD guidelines.
Q: Where does Superior Home Services come in? How are you different from other property preservation companies?
A: Superior Home Services focuses on the recovery of insurance funds on damaged FHA properties in default, and assists servicers in their remediation and repair initiatives as they prepare to convey those properties to HUD. We are not a property preservation company. Our program is tailored specifically to FHA conveyance obligations, and is unique in the default industry in that regard. We are the only company that focuses on the recovery of insurance funds on defaulting FHA properties that are in disrepair. Given this specialization, we can focus on the defects in property condition that hinder conveyance, and require remediation. We work to maximize the insurance settlement, so we get the servicer more money.
HUD guidelines provide timeframes for conveyance of FHA properties in default after a servicer has completed the foreclosure sale requirements. If these timeframes are not met, a servicer must request an extension of time from HUD. Many servicers wait to make repairs to these properties to ensure compliance with state judicial and municipal mandates surrounding borrowers’ rights. These delays prolong and complicate the conveyance process, requiring servicers to commit time and additional resources to meet the regulatory obligations documenting the need for extensions of time. Superior helps FHA servicers avoid committing the extra time and resources.
Q: What specifically does Superior Home Services offer to assist servicers in FHA conveyance?
A: We use hazard insurance proceeds to manage the repair of the property to conveyance condition, limiting corporate contribution from the servicer. Superior manages the repair, and importantly, we ensure that the insurance carrier covers and properly compensates the servicer for all insurable perils, including recoverable depreciation. This leads to higher insurance recoveries and faster repair timelines. In addition, when working with us, FHA default managers have but one point of contact.
Q: Who utilizes your service?
A: Any servicer or sub-servicer that manages damaged FHA properties in default can use our services. Many of our clients have large FHA portfolios and are knowledgeable about regulatory issues and compliance. But we also work with much smaller servicers that do not regularly manage damaged FHA properties and do not routinely convey properties to HUD. We can assist any servicer regardless of their size or the size of their portfolio. And while we’re helping our clients to repair damaged FHA properties, we’re also dramatically reducing or eliminating their corporate contribution as well as reducing conveyance timeframes. The point is to make the FHA default resolution process more efficient.
Q: What are the advantages to doing repairs prior to foreclosure sale?
A: Remediating vacant, damaged FHA properties prior to foreclosure sale allows a servicer to offset potential corporate losses with available insurance dollars, satisfy municipal expectations regarding property condition, and convey a property in a timely manner pursuant to HUD guidelines without having to request any extensions. Otherwise, prolonged legal cases allow damaged properties to sit unaddressed, leading to neighborhood blight and aggressive action by cities and even states. The expectation now is that servicers will address damages to vacant properties quickly.
Q: Vendor management is critical in today’s environment. How does Superior Home Services ensure that its vendors are compliant?
A: Technology. Superior has greatly invested in its IT infrastructure to allow more seamless communication of information with vendors and clients. Our web portal enables us to communicate and disseminate information in real time. Work orders and process deliverables are documented and tracked more efficiently, as photographs can now be transmitted practically as work is being completed. Superior has embraced data management and forecasting tools to determine vendor capability and capacity.
All of this has enhanced our ability to manage our vendors, but we also still employ the oldest method in the book: site visits. We visit our vendors to help them meet client requirements, to meet Superior’s requirements, and to provide a personal forum for feedback and input on how obligations can best be met while also completing work to the highest standards. The result is not only a strong bond and personal relationship with our field network, but higher client satisfaction with our process and our product.
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